Finance (No. 3) Bill

Alan Whitehead Excerpts

Tuesday 5th July 2011 Commons Chamber

[Caroline Lucas]

I entirely disagree. I wish that the hon. Gentleman had been at a meeting with representatives of the solar industry that took place a few days ago in Portcullis House. We were shown presentations by Ernst and Young and others which demonstrated that if a small amount is invested now, solar energy will be able to compete with all fossil fuels and with nuclear power in four or five years.

Although an improved carbon floor price mechanism could help to deliver a less carbon-intensive energy sector, it is important for the Government not to see it as a “silver bullet” solution. Other stronger levers, such as a well managed—I underline “well managed”—feed-in tariff regime and a strong emissions performance standard must also be part of the overall picture. Sadly, however, the Government are falling short in those respects as well. I should like them to devote at least as much effort to stepping up their work at EU level to ensure that the next phase of the EU emissions trading scheme is much more effective than the current phase. The recent collapse in the cost of EU carbon allowances under the scheme is clear evidence of their over-allocation, and the shortcomings of the scheme are becoming increasingly obvious.

I should also like the Government to work with European partners to ensure that, as a minimum, allowances are in line with the policy of cutting EU emissions by between 80% and 95% by 2050, as agreed by member states; that allowances cannot be banked from the second phase of the EU ETS into the third phase; and that a reserve price is set on the auction of permits into the market. Any permits that the market does not want to buy at the reserve price or more should be retired from the scheme.

I urge the Government to undertake to produce the report for which the amendment calls, and to take the opportunity to show how the benefits of a carbon floor price can be maximised and any unintended consequences eliminated. If the carbon floor price is to be effective, we need a tax on the windfall profits of the nuclear industry, along with flanking measures to ensure that those in fuel poverty do not suffer as a result of this policy.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The Economic Secretary to the Treasury has already suggested that those in favour of a carbon floor price should explain how it could be introduced in a different way from that proposed by the Government. I imagine that she will return to that subject at the end of the debate, but I suggest that she need only look at her own consultation document, which led to the amount that has been established and the mechanism by which the floor price works.

The consultation document posited a £1 difference between a Europe emissions trading scheme and a carbon floor price, certainly in respect of the starting period. It also warned about how far away from that £1 difference a floor price might go and what might happen to energy prices in the rest of Europe. As people who contributed to that consultation document suggested, because our energy supply is highly interconnected with that of Europe, a substantial difference could lead to investment going to where the sale price is cheaper, with, perhaps, new gas-fired power stations being developed on the other end of an interconnector rather than lower-carbon power stations being developed at our end of an interconnector.

--- Later in debate ---

[Justine Greening]

Clause 78 and schedule 20 amend the climate change levy to introduce a carbon price floor for electricity generation. We have had a helpful and interesting debate on the two amendments and I shall do my best in the time available to try to address as many of the points that were raised as possible. Before I do that, it is probably worth returning to the question of why this measure is necessary in the first place. Indeed, the hon. Member for Brighton, Pavilion (Caroline Lucas) spent some time setting that out in her speech.

We all recognise that the UK needs significant new investment in low-carbon electricity generation over the coming decades. As the debate has shown, we do not want that to be the only thing that we encourage over the coming years. We also want to encourage a broader transition to a low-carbon economy. As the hon. Member for Penistone and Stocksbridge (Angela Smith) pointed out, many industries that have been mentioned today in the context of the challenges they face have the chance to benefit from their role in the low-carbon economy of the future.

We need significant new investment in low-carbon electricity generation. As well as preparing for an increase in demand for electricity over the following decades, the UK must meet its legally binding CO₂ emissions reduction targets, which require an 80% reduction from 1990 levels by 2050. That is why in the Budget, following consultation, we announced that the UK would introduce a minimum carbon price. As the hon. Member for Southampton, Test (Dr Whitehead) pointed out, we included a number of different scenarios in that consultation so that we could understand and get feedback from stakeholders on the impact of the different scenarios. In fact the carbon price floor will provide a strong incentive for billions of pounds of new low-carbon investment.

[Dr Whitehead]

Does the hon. Lady agree that none of the scenarios in the consultation document included the idea that there should be a £5 premium on the emissions trading scheme as a result of the introduction of a carbon floor price?